Don’t you think that accounting plays an important role in our lives?
Today, every business is in need of the accounting that would enable to take the best decision. Through accounting the management will be able to determine the financial position of the business. Because of the accounting activities, it is possible to retrieve the final report that can enable the management to understand the business position and this will finally give a direction to the business.
Accounting is really essential and is adopted to perform the business transactions. It allows in recording and classifying the information that would finally enable to summarize the transaction in the business. This would allow in well analysing of the financial document such as trial balance, balance sheet and this enable the accounting to be done properly.
Accounting divided into two different categories
There are two categories of accounting:
- Financial accounting:
It completely deals with information that is available to the public such as customers, stockholders, regulatory bodies etc.
- Managerial accounting:
It actually includes information which would not be accessible to the public such as the profit and loss, salaries and the cost of the goods produced in the company.
The main objective of the managerial accounting is to enable the managers as well as supervisors to take financial decisions. The financial accounting will make sure that you have access to essential financial information related to the company to people who are not directly associated with the business. Most of the small business owners are concerned about the managerial accounting system.
What is the purpose of accounting?
Accounting is said to be an important aspect of business and with the proper accounting system it is possible for the business to grow. It is the process through which the enterprise can measure the financial transaction and predict its future. Through this system it is possible to track the assets, liabilities and the income of the business.
Smart and informed business decision is only possible when you consider the past performance of the business and check the current financial condition of the company. The well -organized accounting system will not only help to analyse the financial data of the company but will also allow in growth and ensure profit generation.
Through sounds accounting it is possible to reach the satisfaction level of customers. As you get to know the financial position of the company in relation to its income and the expenses that will give a better understanding on what you need to do in the future and also maintain the customer satisfaction.
Do you want to get into more detailing of accounting?
It also enables to track the debt and the repaying of the loan, the payroll records and the tracking of the loan is highly essential. Accounting can also attract the potential investors and helps in maintaining the budget.
Important aspects of accounting in business
The business organization takes the initiative to collaborate with individual or group of people to achieve a specific commercial goal.
- Planning the budget:
Budgeting is said to be the important part of the business. Through proper budgeting it is possible for the business to make strategies and save money while monitoring the expenditure that would not exceed the budgeted amount. But, to make the apt budget it is important that you consider different records and the well-maintained documents will ensure proper planning.
- Maintain the records:
The business should keep up the records and act accordingly in order to help the business run smoothly. Accounting helps in keeping up the business records. The records would include collecting, organizing and interpreting of the information that would finally be communication to end users.
- Banks and the lenders:
If you want loan for the business from any financial institution, then it is important to show the current financial status which should be acceptable to the banks. The proper accountings system will offer the book of records such as the assets and liabilities, profit records and the paid taxes. The financial institution would help to scrutinize them in the best way possible before taking any decision related to loan.
- Information accessible to investors:
The financial statement and the accounts is represented to the organization and the stakeholders such as the creditors, investors, debtors and the customers. There are many investors who would run from the organization if there is lack of financial records. To understand the business progress it is essential to understand the accounting system.
Any kind of decision of the business organization is made based on the financial statement of the business. The statement would help in retrieving the accounting data. Without the help of proper accounting, the management will not be able to make sound decision.
Accountability in the accounting process
Don’t you think that accountability plays an essential part in the accounting process? But why it is so important and how can you implement it?
It is crucial for the business to be accountable for the methods adopted as they need to operate the business successfully. This would eliminate the business from experiencing any kind of dishonesty and theft in every business.
You need to read the present event of the newspaper and get to know the current situation of the business. The specialized area of accounting would certainly eliminate the fraudulent activity that can possibly take place within the organization is case the accounting system is not properly maintained.
Through improved accounting system you can possibly take care of the working capital and the other cash requirements that take place within the organization. The ultimate aim of any business is to generate profits. No matter whether the business is small or big, it is essential to maintain the accounting system.
Importance of accounting for start-up business
There are many entrepreneurs who have started the business as the hobby and the business make use of the cash based on the accounting. This is the accounting method which would keep record and recognize the transaction when the cash starts changing hands. The entrepreneurs come up with the method which will help in maintaining the accounting information.
The companies tend to grow and expand that would change the accrual accounting method. Accrual accounting is the widely used method adopted in most of the business to keep record of the transactions that occurs.
- Forecast of the financial estimates
The entrepreneurs might be in need of the banks, investors and the lenders along with financial forecast which would help in starting the new business venture. The information is necessary for the business as they require the start-up costs. Entrepreneurs would write the business plan that would include economic forecast and also take into account the monthly expenditure.
- Determining profitability
Accounting is the most predominant ways through which the company can understand the profitability. The small business would be able to create huge amount of sales revenue and can generate profits that can doom the business to failure. Entrepreneurs can understand the use of the assets which would help to generate the services and the cost of inventories which is compared with company’s profit margin.
- The expert insight
Today you will come across with businesses that might take advice from the public accounting or the accountant. The professionals are concerned about delivering the right amount of education and have expertise in helping the entrepreneur to set up small business accounting operations. The individuals are conscious about delivering low rates to the small business so that you can defer the start-up costs.
Hiring an accountant for the growth of company
Companies will not allow growing at quite a steady rate. The project needs to grow your business quickly. The accountant would allow to grow the business this would include hiring employees and taking on the office space. The accountant will make use of the accounting software to do proper analysis for the cash flow and help in the inventory management system. The accountant has the potential to give you a thorough insight on how to grow properly the business through financial analysis. This can also allow in determining the best time when to introduce the new product or service.
Taking the help of accountant is what you need while starting the business. It might be hard to run a business without the help of the accountant.
There are some of the people who start their business from the scratch and other prefers to buy the business that is already in function. The accountant will give you the opportunity to take a view on the company’s account in detail and nothing would appear to be wrong.
It is also important that you consult a lawyer as well as accountant. This will give the peace of mind to the entrepreneur and you have to pay the service that received through accountant.
The accountant will get the financial records of the company and would produce the statement of accounts that would show to any prospective buyers. Making use of the accounting software will help to develop the charts and tables to reflect the condition of the company. The potential accountant will perform the process that is legally approved.
Hiring the accountant for the business
The business owners would find it more comfortable when they hire the accounting services and have specialization in small businesses. There are also other businesses that would hire the accounting staff at times during the financial year. The part time bookkeeping staffs come along with advanced training that allows in managing the financial transaction of business.
The business owner would transfer the financial management of the company to other individual. The entrepreneurs who do not have the accounting skills can outsource the financial aspects of the business which is also an attractive choice.
The expertise in accounting and have thorough knowledge can definitely help the business experience growth. The qualified accountant can definitely help in different ways and can manage the day-to-day finance activities in business.
- Give advice on how to structure the company
- Identifying the cost savings aspect during the operations
- Managing the payroll of the company
- Consult the accountant and get the financial details based on the business plan
- Improve the financial safety and then get into the growth of the company
There are many businesses that would start with the owner as the sole employee and there is a point when the growth may occur and you need to hand over the functions of accounting to any professional. It is the situation when the business needs to hire the accountant. The firms would offer flexibility in the business.
The accounting firm would charge based on the hour and there are also some of the analytic functions which would be priced higher. It is the option that would deliver the high level knowledge to the business entrepreneur.
Essentiality of the small business accounting
The accounting is provided with the tools that would compile along with the information that will help to complete the tax returns and also helps in applying for the business loans. The accounting gives opportunity to understand the financial aspects of the business. You need to understand the financial working of the company and can keep the operations which would be profitable.
Accounting would tell the operation of the business and it need to spend the money on expenses such as the licenses and taxes. In case the books are accurate and current, then make use of the information that may help to make the best choice and also earn the living.
There is not a single way to handle the small business accounting. There are different processes that you can adopt. It is essential to understand the information accurately which will reflect the financial aspect of the business.
If you make use of the bookkeeper, then it is important to read and also understand the financial statement which will allow making smart decisions based on varied information contained. The accountant can allow structuring the financial affairs and getting the most out of the money from selling of business. The business accounting will save the receipts and keep record of all the transaction of your business.
Michelle Johnson is the most efficient and talented online tutors. She has earned the MBA degree from the Harvard University, USA. The teaching style is really unique that helps student to grasp the subject and have a thorough knowledge on it. Students can rely on the tutor and secure good grades in exam.